5. Risk Management
Everyone has heard the term for every action there is a reaction, and every negative has a positive, and what goes up must come down; you get the picture. Well, the same applies for the currency markets we refer to it as hedging using negative correlations, or simply one pair goes up when the other pair goes down and vice versa. Anyone involved in the Forex market needs to understand this basic concept of risk management. This technique is used all the time by banks, and especially major international corporations that do business in other currency besides the dollar. This is simply a logical choice when you are trading multiple currency pairs to ensure that your trading account does not get depleted very rapidly.